Gratis Internet
From Wikipedia, the free encyclopedia
Gratis Internet is a Washington, D.C.-based referral marketing company that rewards customers with products such as iPods and notably at the moment Xbox 360s. However FreePay/Gratis Internet "still have not shipped out any Xbox360's" it is also listed as a "Run Away From" Company.[1]. Detractors have accused the company of operating a pyramid scheme. As of 2004, it is a member of the Inc. 500; while in 2005 Gratis' name was found sitting at number eighteen in the top twenty. Its name comes from the Latin word Gratis, meaning free of charge.
Gratis Internet was established in 2001. Since July 2004, it has launched a number of websites offering free merchandise, most notably iPods, to users who register and complete membership requirements. Although the word "free" is used prominently, would-be members seeking to complete an offer to qualify for the free merchandise are often given a number of options, some of which involve signing up and paying for a service or subscription. Gratis has launched its websites in the US, UK, Canada, Germany and more recently Australia. In August 2005, Gratis Internet branded its websites as FreePay.
The company "has an unsatisfactory record" with the Better Business Bureau, "due to unanswered complaints". Better Business Bureau receives hundreds of complaints a year about FreePay.[2]
Gratis's revenue in 2004 was US $20,479,325.00 according to Inc.com.[1] Inc.com also reports that Gratis Internet has only 12 employees.
In March 2006, Gratis Internet announced new terms of service imposing time limits, which have been controversial among users.[2]
Contents |
[edit] FreePay Process
In order to receive the advertised "free gift" at each of Gratis' websites, a visitor is expected to register and complete one affiliate offer. Affiliates include AOL, Blockbuster, RealNetworks, casino and credit card offers, and others. The affiliate offers typically consist of trial memberships, service subscriptions, credit card applications and the like; some require credit cards during registration, and a few involve payment of some kind, causing critics to claim the "free" label a misnomer.
He or she is then required to refer a set number of people, which varies by the product (the number required is usually the MSRP of the gift divided by US $50). A valid referral is one which has both completed registration via a referral link and signed up for an affiliate offer. Each referral must be a unique user or the account will be "put on hold" during the approval process. Because sponsors must acknowledge the completion of their offer, they are willing to invest more for each referral than they might for other, more traditional forms of advertising.
The advertisers pay Gratis for the referral, between $25 and $90, though the company has not released information as to specific numbers.[3] For example: assuming the MSRP of an iPod is $250, six affiliate signups (the number needed for one user to redeem a free iPod) nets Gratis between $150 and $540. Per the program's terms, Gratis does not need to deliver an iPod to any member with four or fewer referrals. This makes up for any money lost through low-end advertiser payments.
[edit] Pyramid and Matrix Scheme Accusations
Some have accused Gratis of running a pyramid or matrix scheme, both of which are considered fraud in most countries. These accusations probably stem from the fact that, like pyramid and matrix schemes, Gratis requires a perpetually growing user base to satisfy everyone who signs up. The difference is that pyramid and matrix schemes usually require the customer to invest by promising a greater return on the investment, which in turn comes directly from the growing base of new investors. As the scheme grows, more and more investors are needed. When not enough are coming in, the scheme crashes and the base level of investors lose their investments. Gratis users do not necessarily have to pay anything, as the money comes from advertisers who are only paying for the referrals and most of the offers users can take part in are, in fact, free. If new users cease, there is far less to be lost.
The Gratis system is also far more stable. Because of the large variety of offers, and the fact that users can complete more than one, the growth rate required is significantly less.
There are still issues as to how ethical the business practice of Gratis is, though it is more a personal issue than a legal one. Some believe that Gratis is not a viable operation unless all their users receive their goal product; otherwise they are counting on some people to do the work without any reward. Others see it as a good example of opportunity cost, where they can get otherwise expensive electronics for a little bit of work and patience.
[edit] Controversy
The popularity of Gratis's websites erupted in August 2004 and that success has prompted the company to create more similar websites with merchandise catering to other demographics.
Thousands of Gratis members have indeed received free iPods and other merchandise, as well as provided pictorial evidence. While the FreeiPods program appears to be legal under United States law, the controversy mainly rests on the morality of the matrix scheme core of the programs. Not only are early registrants more advantageous when obtaining referrals (characteristic of such programs that rest solely on exponential growth), members of Gratis's programs have posted much spam on bulletin boards and chat rooms violating policy.
In addition, over the last few months (as of December 2004), an increasing number of Gratis members have been complaining about their accounts being placed on hold or their orders being delayed for no apparent reasons and without notification from Gratis. Gratis representatives have claimed that they have violated their company's Terms and Conditions.
On February 9, 2005, Gratis briefly lost support from TRUSTe due to multiple privacy policy violations. On February 11, 2005, TRUSTe retracted its complaints. Sometime later, however, Gratis again lost support from TRUSTe, and has since been without TRUSTe's seal.
Complaints against Gratis on file at the Better Business Bureau can be found at [3].
On March 23, 2006, the Attorney General of New York filed suit against Gratis over the sale of up to seven million user information files (identity with e-mail address) despite a promise of confidentiality to users, considered to be the largest deliberate breach of a privacy policy on record in the United States.[4]
In May 2006, for the first time, Gratis Internet missed payments to its publisher affiliates, citing payment problems from a major partner[citation needed].
[edit] Referral websites
In an attempt to trump the system of referring friends through conventional means, more creative users have designed referral swapping websites to aid users in receiving referrals. One such form is known as the "conga line", a list in which a member starts at the top, and all new people signing up through his link and are then placed at the bottom of the line. Once the creator has gained the required amount of referrals he graduates and the next in line is moved to the top of the list, gaining the new entrees referrals. Typically, lists fall apart shortly after the creator has completed his referrals, but some of the more innovative sites have succeeded in creating more stable web software built to accommodate and sustain a large number of users.
[edit] External links
[edit] References
- ^ Gratis Internet. Inc.500. Retrieved on 2006-03-26.
- ^ Jake (2006). The Official Word. The FreeiPodGuide Forums. Retrieved on 2006-03-26.
- ^ Kahney, Leander. "Making Free IPods Pay Off", Wired, August 18, 2004.
- ^ Gormley, Michael. "Company Sued Over Selling E-Mail Addresses", Associated Press, March 23, 2006.
